Heron Therapeutics, Inc.

Thank you for standing by. Welcome to the Heron Therapeutics Q3 2025 conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Melissa Jarrell, Executive Director of Legal. Please go ahead.

Thank you, Operator, and hello, everyone. Thank you for joining us on the Heron Therapeutics conference call today to discuss the company's financial results for the quarter ended September 30th, 2025. With me today from Heron are Craig Collard, Chief Executive Officer, Ira Duarte, Executive Vice President, Chief Financial Officer, Bill Forbes, Executive Vice President, Chief Development Officer, Mark Hensley, Chief Operating Officer, and Kevin Warner, Senior Vice President, Medical Affairs Strategy and Engagement. For those of you participating via conference call, slides are made available via webcast and can also be accessed via the Investor Relations page of our website following the conclusion of today's call. Before we begin, let me quickly remind you that during the course of this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs, and future performance, all of which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in the Safe Harbor Statement in today's press release and in Heron's public periodic filings with the SEC. Except as required by law, Heron assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. And with that, I would now like to turn the call over to Craig Collard, Chief Executive Officer of Heron.

Thanks, Melissa. Hello, everyone, and welcome to Heron Therapeutics' third quarter 2025 earnings call. Today, we're thrilled to share our third quarter results and provide insight into how product sales are trending. I'd like to begin by highlighting several key accomplishments from the quarter. One of the most significant milestones was the successful completion of our financing. This has been an overhang on the company since I joined, and we're glad to have it behind us. With this resolved, management can now fully focus on commercial execution and product growth. Beyond the successful financing, Team Heron delivered strong operational and financial performance in the third quarter. We generated total net revenues of $38.2 million for the quarter and $114.3 million year to date. This performance resulted in adjusted EBITDA of $1.5 million for the quarter and $9.5 million year-to-date. Our gross margin was 68.8%, which is slightly down from previous quarters, primarily due to a one-time write-off of Sustol polymer inventory. Sustol has been trending downward over the past several months due to increased market competition, and we expect this trend to continue for the foreseeable future. Sinvanti, on the other hand, continues to exceed our expectations. We've maintained a conservative outlook this year, anticipating a potential slight decline in Sinvanti performance as we moved into Q3 and Q4. So far, that decline has not materialized. Despite ongoing competitive pressure that has historically impacted our average selling price, we're pleased that net sales are remaining fairly consistent. We believe this positive trend will continue through Q4 and into next year. Turning to our acute care portfolio, we implemented several new initiatives in Q3, including the Crosslink Ignite program, an incentive-based initiative to improve distributor engagement, the launch of the 200 milligram vial access needle or van, and the creation of the IBM team, a dedicated sales force focused on a PONV only. All of these initiatives were rolled out at different times during the quarter and are beginning to have a meaningful impact. That's why we've consistently stated our belief that the acute products will begin to inflect more prominently as we move into late Q3 and Q4 of 2025. ZMDLF net sales grew 49% in Q3 2025 as compared to Q3 2024. And applying the net sales grew 173% in that same time period. More importantly, we're finally seeing real momentum in the acute care. While quarterly net revenues and unit demand were solid, weekly unit demand from late September through October has been the highest we've ever seen, clearly indicating a possible trend break. Mark will provide more detail on this in his prepared remarks. Lastly, our JCODE for Zenderlef went into effect on October 1st. This is a significant win for Heron and for the providers who rely on Zenderlef in their practices. The JCODE will streamline reimbursement and reduce administrative burden, especially as the no-pay night continues to gain traction. We believe this change will improve access and coverage across both government and commercial payers ultimately supporting broader adoption and better patient outcomes. Also, our pre-filled syringe continues to advance with a timeline to possible approval in late 2027. Bill Forbes, our head of development, will address any questions regarding PFS and other development initiatives in the Q&A. This quarter has been both busy and successful for Heron. With increasing demand for Zendrolaph, Oponvy, and even Symbonti, We're extremely excited about the trajectory of the business moving forward. I'd now like to turn the call over to Mark Hensley, our Chief Operating Officer. Go ahead, Mark. Thanks, Craig.

In acute care, Zenderleff kept its momentum in the third quarter. This is a site-by-site, case-by-case adoption curve. Access enables, OR proof converts, protocols make it stick. We focused on removing friction and tightening execution. The van made prep in the OR easier. The Ignite program kept distributors focused on accounts we can win. Our education and medical support teams help standardize technique and support protocol adoption. And as of October 1, Zinnerlef has a permanent product-specific J-code, which makes billing conversations clearer. Stepping back, the theme is friction removal and focus. Those same disciplines translated to both the POMV and Symbonti as well. In oncology supportive care, Sinvanti remains a steady anchor. As a Ponvi expands and deepens our relationships with anesthesia and pharmacy, we see Sinvanti ordering rise in those hospitals. Let me show you how this progress shows up in the revenue numbers on slide six. For our acute care franchise, net sales were 12.3 million in the third quarter, up from 10.7 million in the second quarter. Zinnerlef net sales were 9.3 million, That is a 49% growth year-over-year versus $6.2 million in the third quarter of last year, and up from $8.2 million in the second quarter. The drivers are consistent. The VAN, the IGNITE program focusing distributors on winnable accounts, support from our education and medical support teams, and now permanent J-code clarity. UponV net sales were $3 million. That is 173% growth year-over-year versus $1.1 million last year. and up from 2.5 million in the second quarter. Third quarter upon V growth occurred before the dedicated team was fully active. The team finished training in October and entered the field in early Q4 to support momentum. Now let me show how this demand shows up in Zenderleff operating metrics on slide seven. Our installed base continues to expand as sites move from first case to protocolized use. Average daily units increased from 882 in the third quarter last year to 1,127 in the third quarter this year. an increase of about 28%. Ordering accounts rose from 705 to 833 over the same period. This comes from friction removal and focus. The VAN, IGNITE program, our education and support teams, and permanent J-code clarity streamlining reimbursement. You will also see October plotted on the line, significantly above September. It is a preliminary single month and not a proxy for the fourth quarter. We will stay disciplined and let the quarter play out. With that context, let's turn to slide eight and Apambe. Apambe's trajectory is strong. Demand units grew 142% year over year. Average daily units increased from 418 to 998. And ordering accounts increased from 299 to 405. We launched the dedicated Apambe team on July 1. Six representatives focused on high potential hospitals. The team completed full training in October, so Q3 reflects partial deployment. Full activation supports momentum going forward. In addition, the 2025 PONV prophylaxis consensus guidelines are expected to be published in Q4. A PONV is anticipated to be part of the guidelines, which should significantly increase awareness of its availability and clinical profile. We look forward to aligning our education and disseminating the information with our recently expanded field sales and medical teams. Now turning to the oncology care franchise on slide nine. Oncology franchise net sales were 25.9 million in the third quarter. Sinvanti net sales were approximately 24 million, up about 6% year-over-year and stable sequentially. As Aponvi broadens anesthesia and pharmacy relationships, we are beginning to see Sinvanti pull through in those same institutions. Sustol net sales were 1.9 million, down about 32% year-over-year. We plan to wind down commercialization over the next 12 months while we evaluate potential product updates, with a possible late-2027 reintroduction subject to development and regulatory progress. We will continue to support customers and manage the transition responsibly. To wrap up, we are seeing structural progress. The VAN, the IGNITE program, clinical education, and permanent J-code clarity are turning Zinnerlef first cases into durable protocols. Aponvi's hospital curve continues to strengthen, supported by a fully trained and strategically aligned team positioned ahead of the imminent release of the updated 2025 PONV prophylaxis consensus guidelines. Sinvanti remains a stable anchor, and as Aponvi expands hospital relationships, we believe Sinvanti will benefit. October stepped up for Zinnerlef, but it is a preliminary single month. We will stay disciplined and let the quarter play out. Thanks, and I'll now turn it over to Ira.

Thanks, Mark. Our product gross profit for the three months ended September 30, 2025, was $26.3 million, or 68.8%, which decreased from 71.2% for the same period in 2024. This decrease is due to an increase of $1.4 million of inventory reserves and write-offs recorded and an increase of $1.3 million in the cost of units sold, primarily due to supplier mix. For the nine months ended September 30th, 2025, our product gross profit was $84.1 million or 73.6%, which increased from 72.5% for the same period in 2024. This increase is due to an increase in units sold and a lower cost per unit due to the supplier mix. SG&A expenses for the three months ended September 30th, 2025 was $26.9 million compared to 23.5%. for the same period in 2024. The increase is primarily due to higher personnel and related expenses due to new hires and increased ZENRELF marketing costs. SG&A expenses for the nine months ended September 30th, 2025 was 78 million compared to $77.3 million for the same period in 2024. The increase is primarily due to increased marketing costs related to ZENRELF offset by a decrease in personnel and related costs due to terminations and a one-time stock compensation expense in 2024, which did not reoccur in 2025, and a decrease in legal expenses due to timing of litigation. Research and development expenses were $3.5 million for the three months ended September 30, 2025, compared to $4.5 million for the comparable period in 2024. The decrease is primarily due to timing of expenses. Research and development expenses were $8.7 million for the nine months ended September 30, 2025, compared to $13.5 million for the comparable period in 2024. The decrease is due to decreases in personnel and related expenses due to terminations, and a decrease in write-offs of property and equipment and other assets. For the three months ended September 30, 2025, we incurred a net loss of $17.5 million, compared to a net loss of $4.8 million for the same period in 2024. The increase in net loss is primarily due to the $11.3 million loss on debt extinguishment recognized in the quarter. For the nine months ended September 30th, 2025 and 2024, we incurred a net loss of $17.2 million. The net loss for the nine months ended September 30th, 2025 included a one-time charge of $11.3 million related to our recent debt extinguishment. Cash and short-term investments at September 30, 2025 was $55.5 million. As a result of the debt and equity transactions completed in the three months ended September 30, 2025, $13.1 million was added to cash and short-term investments. If we had excluded depreciation, stock-based compensation, and inventory reserves and write-offs, our adjusted EBITDA results would have been a positive $1.5 million operating income for the three months ended September 30, 2025, compared to a loss of $400,000 for the same period in 2024. For the nine months ended September 30th, 2025, our adjusted EBITDA is $9.5 million operating income compared to a loss of $700,000 for the same period in 2024. We are reaffirming our previously given guidance for net revenue of $153 million to $163 million and adjusted EBITDA of $9 million to $30 million. And now we'd like to open the call for any questions.

Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while I compile the Q&A roster. Our first question comes from Carl Burns from Northland Capital Markets. Please go ahead.

Thanks for the question. Congratulations on the quarter. Just turning back to the slide with respect to Zebra Labs. in the first few weeks of October, it looks like you're pushing 18% in terms of increase. And that's on a month-over-month basis. Is that correct?

Yes, Carl, that's correct. It's roughly correct. Yeah, it's 17%, 18% right in there.

Excellent. Fantastic. And then a financial question. If we look at gross profit margin and back out the one-time stocking charge, which I think is around $2.2 million, you end up with approximately an adjusted gross profit margin, which would be around 74.5%. Does that sound correct? That's correct, Carl.

Yeah, that's accurate. Which is in line with what we've been, you know, for the last few quarters.

Okay, and then one further adjustment, which is the extinguishment of debt. What would the net interest income line be backing that out? Would that be somewhere in the 2.1 million vicinity or... What number should we use there?

Going forward, yeah, probably about 2.5 million would be going forward.

Yeah. Okay. So 2.1 for the quarter, but sort of adjusted for the full period. 2.5. You got it. Cool. Perfect. Congrats again. Thank you. Thanks, Carl.

Thank you. Our next question comes from Brandon Folks from HC Wainwright. Please go ahead.

Hi, thanks for taking my questions and congratulations on the quarter. Maybe just from me, you know, understanding it's very early days on the internal sales team. Now, can you just talk about, though, how you're viewing those on ZinRelease and upon the, you know, and how you think about potentially adding to those teams in 2026 or sort of the measure of success to potentially add to those teams in 2026 And then any additional investments you're thinking on the commercial side behind the two products in 2026?

Thanks for the question, Brandon. This is Mark Hensley. I'll start and then we'll let Craig kind of finish it up. So, you know, internally, you know, we're very pleased with the kind of structural changes we made. At the beginning of Q3, you know, just as a reminder, we now have a dedicated center left team, a dedicated upon B team. That upon B team is also, you know, beginning to do some work with Sinvanti. And so we think there's a lot of synergy there on both sides. And so, you know, the increased focus we believe has, you know, is a partial impact on the results we're seeing in the quarter and certainly as we go forward. into next year. In addition to that, we have better alignment with our distributor partners, and so certainly we think all of those things being put together will result in increased sales as we go forward.

Yeah, Brandon, I would sort of add to that. As we think about the product going forward or the products going forward, I think we've been pretty consistent in saying when we see sort of pockets in the country take off when we have let's call it conducive events like access into an account, we have good cross-link participation, and we have certainly personnel in that area. Once we see that type of success, we would like to obviously mimic that where we can. So I think going forward, we continue to look for those pockets, and we're beginning, as the data suggests, we're beginning to see that. we're in the process of going through our budgeting process for the year. And I think we'll be looking at where we can add in specific pockets, you know, and again, stay within profitability and so forth. But I think you're going to see more to come on that because, again, we're beginning to see a little bit of a different trend. And so if we can expand that, we would certainly like to do that.

Fantastic. And maybe just one follow-up from me, just on Zin Relief. Granted, the Demand curves look really, really good. I appreciate you sharing those. Just given the VAN came online pretty significantly in the quarter, any inventory stocking benefit in the revenue, in the reported revenue line in 3Q on ZinRelief?

You know, we didn't see, you know, we had that kind of similar bump when we launched the 400 VAN. You know, because the 200 van is really only about 35% of the total sales, there was a minimal, let's say, bump, I guess, but not to the degree that we saw with the 400. So the inventory remained relatively stable, you know, compared to prior quarters.

Great to hear. Congrats on the quarter, and that's all from me.

Thank you.

Thanks, brother.

Thank you. Our next question comes from Serge Belanger from Needham. Please go ahead.

Hi, good morning. First question regarding the No Pain Act. You just gave us an update on its implementation and what you're seeing from commercial plans, whether they are following in the footsteps of Medicare. And then secondly, on the oncology care franchise, maybe just provide a little bit more color on your long-term outlook for that franchise. Sounds like you expect Suestall to remain under pressure for the foreseeable future? And then on Sinvanti, do you expect competitive pressures to come back despite the ones that didn't materialize in the third or fourth quarter? Thanks.

Yeah, Serge, I'll take the Sinvanti question, then I'll pass the other over to Kevin on the no-pay nine. Again, we've been saying all year long, and even in my prepared remarks about Symbonti, we felt that with the competition out there that we could see a little bit of a dip in Q3 and Q4. We have yet to see that. We've been fairly consistent in being able to keep accounts and that type of thing. But to your point, it is a very competitive space, and we will continue to have pressure And, you know, we could lose the account from time to time, or we could be forced to, you know, take our price down to keep an account. So, I mean, that's just sort of the market we're in. We're going to continue to sort of look at this pretty conservatively. What I can say on the upside, though, with the IBM team that we have, we're beginning to promote Sylvante a bit more from a rep standpoint within hospital accounts. And again, we're thinking that will have or could have a positive impact. Again, still facing the same competition, but the fact that we have a little bit of a larger voice out there, we've actually, we had an account we won about three weeks ago that was fairly significant. And so, again, if we can keep doing that, we think we can keep things fairly stable as we move forward. So, we'll continue to update, you know, quarterly, but I think our outlook remains, you know, fairly consistent with things we've said before.

Yeah, hey, Serge. Kevin Warner. So in regards to the No Pain Act and the impact we're seeing out in the field, it's definitely starting to build momentum. As we said previously, as expected, it would take six, nine months and be tail half of the year once providers and systems got educated on the fact that you could reimburse outside the bundle. And it's not typical, as we know. So we're seeing education happen across all segments from some of our competitors, obviously, other companies that are included in the No Pain Act. They're standing at platform presentations like at ASA and delivering the message out there. So we're continuing to educate around or provide the systems in place and educational materials of how to actually bill separately. Commercial payers, to your point on that question, we are seeing some momentum there also. We believe it would take them time to reassess and do a rear view take on it and see what's happening with implementation. But you have providers like Aetna and Cigna that are providing separate reimbursement, and it varies state by state with individual commercial plans that we see out there. Overall, as an estimate, we see about 75% of all ZIN relief indicated procedures, especially our target procedures, have some form of coverage, whether it be a Medicare or a commercial plan. We have a few other things from the economic perspective that are tailwinds coming into 2025 for us when you look at the Teams model by CMS. which is a value-based care model. So you're looking at things like patient-reported outcomes and satisfaction. So do you feel pain? Do you have PONV? That's going to be a significant tailwind. Also, the dissolution of the inpatient-only list, specifically about 285 orthopedic procedures are coming off that inpatient-only list. So that'll make them outpatient-eligible procedures now and thus reimbursable under things like the No Pain Act. So A lot of value and impact is coming to our patients and really changing the model to a value-based care, looking for these advances in our healthcare system, long-acting advances like Zinrelief and Oponvy that can help facilitate this transition as we're moving our phases of care.

Yeah, Serge, just to maybe address the second part of your question regarding Sustol, I Similar scenario as we faced with Symfonte, although it's just been a little bit more competitive on that side. And again, we have fewer accounts. And so what we've seen over the last few years, we've had a continual decline on our ASP. And so what we've decided to do is wind this product down over the next, you know, into next year. And again, our plan is to look at possibly improving the delivery of that product, whether that be a lighter gauge needle or what have you. But we would like to bring that out possibly late 27, back into 28 as a relaunch product. And again, there's things we can do there from our selling price and that type of thing that would possibly bring this product back to market. And so we'll talk more about that as we move forward and ideas that we have, but The plan now is to wind this down as we move really to the end of next year. Thanks.

Thank you. Our next question comes from Sierra Dong from Jeffries. Please go ahead.

Hi, this is for Cara. Thank you for taking our question, and congrats on the quarter. So my question is about the pre-filled syringe program. So you said if successful, it's expected to be approved in 2027. And based on your feedback from physicians and how do you expect the pre-filled syringe program to help on the franchise on the long term? How can we think of the momentum there?

Thank you. Thank you for your question. This is Bill Forbes.

I'll just give a little bit of an update on this. We've recently just manufactured our registration batches, and with that have initiated our stability program. As you know, every new product has to undergo at least one year of real-time stability. So we've got that clock ticking. So we're glad we've crossed that milestone, and that's why we're looking. Obviously, once we've completed that stability program, we'll go ahead and file, and it will be approved hopefully in 2027. The impact, I think, is one that, as you can see from the van, we've had a bit of an uptick. And I think, you know, as far as simplifying and speeding the application and use of Xenralef, the van has been a big step forward. But the pre-filled syringe takes it to another level. Obviously, in this scenario, we're just going to go ahead and open up the pre-filled syringe packaging and place it in the surgeon's hands so that they can it can go ahead and install the product. So I think when it comes to receiving the product, it simplifies things even to a much greater extent and obviously will speed, I believe, the conversion of accounts into use of Xenroliff. I don't know if Mark has any other comments on it. No, I think that was great.

Yeah, I would just add, you know, I think Bill's spot on it. You know, when you think about simplicity, we still have the scenario where when we go into onboarding an account, there is a training, even though the van has improved it dramatically and being able to draw the product out of the vial. And so, you know, if you think about really being able to simplify your product and now you go in and you open a tray and you dump the product in the sterile field and basically it's ready to go, it just takes one step out of the process. So again, we certainly think this is going to have a positive impact. And, you know, again, as things are moving forward, we think this just makes the product, you know, that much better and adds another benefit.

Okay. Thank you. I do have a follow-up. So for the J code for ZernLift, it's also applicable to the pre-filled syringe and also for the van, right?

It would be once the pre-filled syringe is launched.

Yes, that's correct. Okay. Got it. Got it. Thank you. Thank you.

This concludes the question and answer session. I will now turn it over to Craig Colliart, CEO, for closing remarks.

Thank you, Rob Ritter, and thank everyone for joining the call today, and we look forward to speaking to you all next quarter.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.